Is this really a surprise?

You say you believe most ipod owners get their music from illegal file sharing - which makes me guess that either you're pimping for the RIAA and the music companies, or at least you've bought into their hype.

Most ipod music comes from CDs that people already own. The RIAA would love to make this illegal, but it's still fair use. While they're at it, we should be able to buy digital versions of vinyl we own, for a significant discount, instead of having to re-buy and re-buy and re-buy every time a new format comes out.

ITMS is too expensive, and it's still defective by design - the protected format means that when a new technology comes along, we're going to have to re-buy AGAIN. THIS is why ITMS isn't selling much.

Yes, there is some volume of illegal file sharing. Consumers may be stupid, but we've been fooled too many times already. If anything, this industry contempt of its customers is what is pushing people to illegal file sharing networks and companies like AllTunes. We dump millions of dollars into the music industry and they still don't trust us? Might as well steal from them. Finally, it's often easier to steal something than to buy it legitimately. Go online - a few clicks, and you've got any song you can think of.

There are 30000 FREE concerts on Archive.org. NPR and other organizations produce tons of FREE Podcast content. I use iTMS only to browse what bands I am unfamiliar with sound like.

"Mr. Morris hinted that he'll seek a similar rate from the iPod when it comes time to renegotiate UMG's iTunes licensing agreement this year."

I wouldn't want to be in the room if he tries that. He should note well what happened to Disney's Eisner when he crossed Steve Jobs.

First, you're comparing 3% of online households to 20% of people.


Firstly one would expect that quite a few of those households account for multiple users. iPods are quite viral and I personally know quite a few households that started with one iPod and quickly grew to one or more iPods per person in the household.

Secondly, as an earlier poster has mentioned, most people who buy iPods probably are already fond of music. And most people who are fond of music probably already have something of a music collection. I haven't counted recently; however, I know that I have more than 500 CDs. And, frankly, I'm not really all that interested in most mainstream popular music. So there's not a lot that I'm going to buy on iTunes until I get around to ripping more of my CDs.


On the other hand, with CDs ridiculously priced, I've pretty much given up on buying most new CDs. But I find a fair bit of value via Amazon's used CDs or via eBay. So, after years of screwing the consumer, the record companies can take a hike (which undoubtedly is why they're trying to figure out ways to make it illegal to sale "used" CDs).

reinharden

This is complete bogus. Last week, the Wall Street Journal reported that iTunes had sold approx. 420 million tracks in the first 9 months of the year. 3% of the US popoulation is about 9 million. 9mm goes into 420mm 47x -- so $46 dollars spent per person, which is 33% more than what Forrester claims. This doesn't even include video downloads.

Nevertheless, Universal will in my opinion NEVER be able to milk a fee out of AAPL's iPod. Universal depends on iTunes for almost 10% of their sales! AAPL could just turn around and say F-off. Moreover, the Zune comes prelaoded with Universal tunes. Maybe that's why they're getting paid $1 per sold Zune!? Anyone though of that!?

well this report would suggest that mr. morris has lost a bit of leverage in the negotiations.

i hope apple tells him to stick it where the sun doesn't shine, even if it means no UMG artists on iTunes.

apparently only 3% of the world will care anyway.

"3% of households that have purchased music from iTunes store spent a total of $35 for the year, and half of them spent only $3 or less at a single time" So what did the other 97% of households that have purchased music from iTunes spent? Must be a typo. It would be hard to find someone surprised that people were only buying a few songs at a time. That can add up if you use it ever few days.

The iTunes store is a pretty good setup but their selection is pretty limited. I have trouble finding most stuff I'm looking for on it. My entire music collection is in iTunes but I've never used their online store, mostly due to lack of what I'm trying to find. There's a good record store down the street which orders in a lot of independant artists. There are also a lot of other options for people to get music from other than iTunes. Ever hear of eMusic? Second largest in online sales in US and is all Non-DRM independant artists. No Universal artists and they're the second largest seller. What does this say about the online market? That a whole lot of people aren't buying what Universal is selling so I don't see how they can ask for a a royalty on players. Why not give royalties to independant artists as well?

I'm not sure how this article decides that because people aren't buying much from ITunes (a billion songs or something), that all music must be stolen. Strangely enough, you can also transfer your entire CD collection to iTunes (as everyone does when they purchase an iPod, or like I've done to run my entertainment centre without actually owning an iPod). So the statement showing a small amount of digital sales could also indicate that almost all sales are still physical CDs. A lot of people don't trust their computer not to crash and lose their music so they prefer to purchase CDs rather than digigal files. Also, with the amount of filler on CDs put our by major labels (ie: Universal), no one should be surprised if people are only buying the single song they like and not the entire album. Since people now have that option and can listen to samples of songs and read album reviews at the same place they purchase the music, you can't just put out an album of filler with a good single and expect the full package to sell.

1: The Forrester Research report finds that the 3% who bought from ITMS spent an AVERAGE of $35, not a TOTAL of $35. There is a difference, in case you don't know.

2: ITMS has sold over 1 billion songs. If you can, multiply that by $0.99. That's a lot of money, isn't it? I'd say that's not too shabby for a flawed business model.

3: I have a 30gig iPod (in my household of 3 we have 5 iPods of various types and generations). It is nearly full, and yet not one song on it is illegal. All are from CDs that I have purchased at the record companies inflated prices.

Apple doesn't want to point out the obvious but their margins on music is like 1% and probably a few ticks higher on video but the margins on ipods are 25-35% so while it's a nice service, Apple actually would rather you just keep buying ipods versus the music. It's really no big deal to Apple - since the stores run on their hardware and the software is really a component of the OS, as long as it breakeven, it's just looks nice for Apple to have that option for users.

And as noted, this will only help in Apple' negotiations with the record labels - clearly people know how to get music onto their ipods from a non itunes stores option so if Uniersal tries to extract more money or boycotts the itunes, they are really hoisting their own noose.

Do people buy online music? Do you think the answer is "no" because of piracy?

Music industry all those years is not getting it. If they don't standardize the online music format using only one DRM, compatible with all players, I don't believe people will ever start buying. But they were too busy hunting p2p networks and users in the previous years. In the meantime 4-5 ,incompatible to each other, DRM formats appeared.

Why not just buy the CD you are sure it plays anytime-anywhere ? If there were 4-5 different CD formats do you believe CDs would have survived for 20 years now?

In any case we are so tired of format wars. (New example: HD-DVD vs. Blu-Ray, plus the new Chinese format)

Wow, it really is crap reporting like this that will lead to a drop in the share price, not actual figures.

iTunes Music Store is makes a VERY small profit so Apple can sell iPods. They don't need more people with iPods to use it, they want people withOUT iPods to use it and hence need to buy an iPod.

"If I told you that only 3% of online households in the United States have bought music from iTunes in the past year would you believe me?"

No. No I wouldn't believe you.

As a long-term iPod owner, I have bought dozens of albums and many single tracks. I have also ripped most of my CD collection (which ranges in the hundreds of CDs) and have nary a single illegal track.

To call iPod owners thieves is quite insulting, especially to the honest folk who just want to be able to listen to OUR music when we are on the move.

Perhaps you should go back to dealing strictly in stocks? You don't sound very informed about the digital music industry.

The main problem I have with Fairplay is the 5 computer limit... If I want to have copies of my songs on every computer that I possibly might sit down in front of at work and home, then I want to be able to listen to my music there without having to remember to deauthorize the computer when I'm done. It's irritating.. and what's with the "only allowed to deauthorize all computers once in a year" seems like BS, and a good reason to support hacking Fairplay.

Would you believe me if I told you that the author of this blog is creating statements of fact from inconclusive polls that upon reading fly in the face of the writers own conclusions.

Lets look...
Forrester Research issued a report last week declaring that the 3% of households that have purchased music from iTunes store spent a total of $35 for the year...

OK genius, that would be 3 out of every 100 iTunes customers spending 35.00 total.
Not 3% of the online households as you put it.
Is there any percentage spending more than 35.00?
How exactly did you make the quantum leap of logic to assume that everyone else must be off stealing music from peer to peer networks?
Was any percentage of the iPod users out there ripping their own CD's?

I'm glad you not in a position where what you think matters.